Readers of this blog may be concerned that it has become all Jeffrey Epstein, all the time. The reason for my spending so much time on it is that the money aspects of this story might blow the lid off the seedy underbelly of the wealthy class in the US who have got so used to thinking of themselves as immune to any consequences of their actions, however awful. Anything that strips the veneer off them and shows them as they really are is something I am going to help move along in any way I can.
Let’s review what we know about the facts of the case. Epstein lived the life of a very wealthy person but it is murky as to exactly how wealthy he is and good reason to suspect that he was exaggerating it. Although he claims to be a hedge fund manager, it is not known how he earned his money and he has only one named client. Celebrities were constantly in his presence and attending his parties and otherwise socializing with him. Epstein is clearly a pervert who preys on young, underage, girls and seems to have them around all the time. And yet, these same celebrities claim to have not been aware of his perversions, with some even claiming not to have noticed any young girls around, despite their constant presence. And even after he was convicted in a sweetheart plea deal in 2008 and the scandal blew wide open recently, many of these celebrity friends not only did not condemn him, they only mildly distanced themselves from him, with some even claiming that they did not believe the charges against him.
So what the hell is going on? How can these facts be explained? It turns out that there is an explosive theory going the rounds. I came across it in this article by Michelle Celarier who covers the Intelligencer beat at New York magazine. She looked at all the puzzling elements of the Epstein story that simply do not add up and decided to start by asking hedge fund managers if they could explain Epstein’s accumulation of wealth. They replied that it had long been a source of some speculation in their circles and they were baffled. It turns out that Epstein had only 20 employees instead of the 150 he claimed, and that his assertion that he exclusively made all the investment decisions seemed implausible. They said it reminded them of the Bernie Madoff Ponzi scheme where the employees were only needed to process the checks since there was no fancy investing going on at all.
“I’m hearing about the parties, hearing about a guy who’s throwing money around,” says [Douglas] Kass, president of Seabreeze Partners Management. While stories about young girls swarming Epstein’s waterfront mansion and the sex parties he hosted for the rich and powerful were the talk of the town, Kass was more focused on how this obscure person, rumored to be managing billions of dollars, had become so wealthy without much of a track record.
Kass was well-connected on Wall Street, where he’d worked for decades, so he began to ask around. “I went to my institutional brokers, to their trading desks and asked if they ever traded with him. I did it a few times until the date when he was arrested,” he recalls. “Not one institutional trading desk, primary or secondary, had ever traded with Epstein’s firm.”
For decades, Epstein has been credulously described as a big-time hedge-fund manager and a billionaire, even though there’s not a lot of evidence that he is either.
Naturally, this air of mystery has especially piqued the interest of real-life, non-pretend hedge-funders. If this guy wasn’t playing their game — and they seem pretty sure he was not — what game was he playing? Intelligencer spoke to several prominent hedge-fund managers to get a read on what their practiced eyes are detecting in all the new information that is coming to light about Epstein in the wake of his indictment by federal prosecutors in New York. Most saw signs of something unsavory at the heart of his business model.
To begin with, there is much skepticism among the hedgies Intelligencer spoke with that Epstein made the money he has — and he appears to have a lot, given a lavish portfolio of homes and private aircraft — as a traditional money manager. A fund manager who knows well how that kind of fortune is acquired notes, “It’s hard to make a billion dollars quietly.” Epstein never made a peep in the financial world.
Epstein was also missing another key element of a typical thriving hedge fund: investors. Kass couldn’t find any beyond Epstein’s one well-publicized client, retail magnate Les Wexner — nor could other players in the hedge-fund world who undertook similar snooping. “I don’t know anyone who’s ever invested in him; he’s never talked about by any of the allocators,” says one billionaire hedge-fund manager, referring to firms that distribute large pools of money among various funds.
Epstein’s spotty professional history has also drawn a lot of attention in recent days, and Kass says it was one of the first things that raised his suspicions years ago. Now 66, Epstein didn’t come from money and never graduated from college, yet he landed a teaching job at a fancy private school (“unheard of,” says Kass) and rose through the ranks in the early 1980s at investment bank Bear Stearns. Within no time, Kass notes, Epstein was made a partner of the firm — and then was promptly and unceremoniously ousted. (Epstein reportedly left the firm following a minor securities violation.) Despite this “squishy work experience,” as Kass puts it, at some point after his quick exit, Epstein launched his own hedge fund, J. Epstein & Co., later renamed Financial Trust Co. Along the way, he began peddling the improbable narrative that he was so selective he would only work with billionaires.
Given this puzzling set of data points, the hedge-fund managers we spoke to leaned toward the theory that Epstein was running a blackmail scheme under the cover of a hedge fund.
Wait, wait, blackmail? Tell me more, Michelle!
How such a scheme could hypothetically work has been laid out in detail in a thread on the anonymous Twitter feed of @quantian1. It’s worth reading in its entirety, but in summary it is a rough blueprint for how a devious aspiring hedge-fund manager could blackmail rich people into investing with him without raising too many flags.
Kass and former hedge-fund manager Whitney Tilson both emailed the thread around in investing circles and both quickly discovered that their colleagues found it quite convincing. “This actually sounds very plausible,” Tilson wrote in an email forwarding the thread to others.
At this point, you should stop reading this and click on this link to that twitter thread. It is explosive and speculative (so read it soon before it gets taken down) but it does tie together neatly all the puzzling facts that I listed at the beginning, especially why the people in Epstein’s circle are lying so low. The problem is that while plausible, this lacks any corroborative evidence, at least for now. This is where investigate reporting is needed to confirm or debunk.
If the blackmail theory sounds far-fetched, it’s worth keeping in mind that it was also floated by one of Epstein’s victims, Virginia Roberts Giuffre. “Epstein … also got girls for Epstein’s friends and acquaintances. Epstein specifically told me that the reason for him doing this was so that they would ‘owe him,’ they would ‘be in his pocket,’ and he would ‘have something on them,’” she said in a court affidavit, according to the investigative series in the Miami Herald that brought the case back to the public’s attention late last year.
In the 2015 filing, Giuffre claimed that Epstein “debriefed her” after she was forced into sexual encounters so that he could possess “intimate and potentially embarrassing information” to blackmail friends into parking their money with him. She also said photographic and video evidence existed — an assertion that looms especially large now that federal investigators have found a trove of images in Epstein’s home safe.
Suddenly the media are all over the Epstein story. But that was not the case for a long time. Only Julie K. Brown of the Miami Herald covered the case and its was her digging that brought the Epstein case and the sweetheart deal to light. So why the media silence for so long? Ed Pilkington explains.
When Julie K Brown of the Miami Herald approached a former police chief of Palm Beach, Florida, in 2017, hoping to get him to open up about his investigation of the child sex crimes for which the wealthy financier Jeffrey Epstein had been fleetingly jailed a decade earlier, she was surprised by how unresponsive he was.
Michael Reiter told Brown he had been down this road many times and was sick of it. As Brown recalled in a WNYC interview last month, Reiter said he had talked to many reporters and told them precisely where to find damning evidence against Epstein. But nothing ever came of it.
“He was convinced that a lot of media had squashed the story and he was fed up,” she said.
Reiter warned Brown what would happen were she to continue digging: “Somebody’s going to call your publisher and the next thing you know you are going to be assigned to the obituaries department.”
The media’s handling – or mishandling – of the Epstein affair is a story of extremes.
It is a heartwarming success story, of how one intrepid reporter pierced the veil of secrecy and found the truth. Brown’s coverage has had consequences: Epstein was arrested last Saturday and indicted on new sex trafficking charges by New York prosecutors who praised her work. In the fallout, Acosta was forced to resign.
But there is also a less cheerful narrative. Why did the police chief’s appeals to the media fall on deaf ears? Why would so many years pass before the shocking extent of Epstein’s crimes and Acosta’s sweetheart deal were revealed by a local newspaper with severely limited resources?
In fact, the two extremes of the story are directly linked: Brown told WNYC one of the reasons she began looking into Epstein was that she was puzzled about the public silence surrounding him.
“There really was nobody pursuing this at all,” she said. “That was one of the things that intrigued me about this case. Why isn’t anyone standing up and screaming?”
This article looks specifically at what happened with the 2003 Vanity Fair article by Vicky Ward on Epstein (that I discussed here) that had the key facts about Epstein’s perversions gutted by then editor Graydon Carter.
Publication was delayed, then Ward was told the paragraphs on the abuse of the women had been deleted.
Ward believes Carter caved under Epstein’s pressure. She recalls confronting the editor about the excised paragraphs, and said she has a note in her archives that has Carter saying: “I believe him … I’m Canadian.”
Carter remembers events very differently. In his account there were legal issues around the women’s stories that prevented publication, most significantly that the women themselves were unwilling to go on the record.
Ward says she has documentary evidence that shows the women were emphatically prepared to go public, including fact-checkers’ and legal emails to Epstein from Vanity Fair asking for his response to the allegations made by both sisters.
That “I’m Canadian” seems like a strange non sequitur. Incidentally, Lawrence Krauss, good friend and strong supporter of Epstein even now, is also Canadian. These two are not doing the image of that country any good.
So now will the big guns in the media who have far more resources than the Miami Herald start digging into Epstein’s seeming hold over so many prominent people? Or will they be pressured to tamp the story down since the top people in those media outlets move in the same rotten circles? Hamlet’s complaint about the rot in the state of Denmark is nothing compared to the stench that this story reveals about the elite circles in the US.